Fed Officials Hint at Rate Hikes Despite Weakening Labor Market

According to minutes from the US central bank's July meeting, many Federal Reserve officials believe additional interest rate increases may be necessary if inflation fails to cool.

The minutes of the Federal Open Market Committee's (FOMC) July 28-29 meeting showed that some officials said financial conditions might not be restrictive enough to return inflation to the Fed's 2% target.

Cleveland Fed President Beth Hammack, Dallas Fed President Lorie Logan, and Minneapolis Fed President Neel Kashkari dissented from their peers, favoring a 25-basis-point increase in rates. They argued that an immediate rate hike could help prevent the need for a faster and potentially more economically costly tightening cycle later.

The minutes underscored continued concern by officials about price pressures despite signs of weakening in the labor market. The personal consumption expenditures price index, the Fed's preferred inflation measure, declined 0.1% month-on-month in June but remained 3.7% higher annually - well above the central bank's target.

Financial markets expect the Fed to keep rates unchanged until December before delivering another increase, which is later than previously anticipated.